Anatomy of a Credit Report: What You Should Know

When you’re trying to build your credit — or just being vigilant about avoiding identity theft — it’s important to check your credit report regularly. Each of the three nationwide credit reporting agencies (Experian, Equifax and TransUnion) will provide you with a free credit report once every 12 months, upon request. But when you receive that credit report, it isn’t always easy to know what to look for or what to do if you believe the report contains incorrect information. Let’s break it down.

Credit Report, Credit Score — What’s the Difference?
While the credit score may be the most talked-about item on your credit report, the credit report is bigger than just a numerical rating. (And it’s important to note: Your score is not included in the free report. However, you can order it through the same website, which is the only one authorized by federal law, for a fee.)

The credit report itself is “a detailed listing of all your debts and payments, going back through your entire payment history,” says Kevin Gallegos, vice president of Phoenix operations for Freedom Financial Network. “For each credit account you have, the report shows creditors' names, the amount owed, the highest balance owed, available credit, whether the account is open or closed (and who closed it), the number of times a payment was past due and whether the account is in default.”

The five sections of your credit report include:

Identifying information. This is where you’ll find your name, address, date of birth, Social Security number and aliases. Gallegos recommends reviewing this information carefully to be sure it is accurate. “If it is not, you could be held responsible for debts that are not yours,” he says.

Creditor information. Usually the longest section, this is a list of every credit account you have had, with information about the lender, how much you owe, whether the account is current or past due, whether it is open or closed and other status information. Review it to make sure each account belongs to you and that all information is accurate.

Collection accounts. This section will list any accounts in collection. If your report shows some, make sure it is accurate. “Contact collectors to be sure the debt is yours,” Gallegos says. “If so, work to repay it as soon as possible. Then ask the agency to send a letter to you and the credit bureaus stating the debt has been paid. If a debt is not yours, ask the collection agency to send a letter stating that information to you and to the credit bureau.”

Public records. Here, you’ll find information about public financial records such as bankruptcy judgments, liens and overdue child support. Again, review for accuracy — serious financial problems and bankruptcy filings could remain here for seven to 10 years.

Inquiry section. This is a list of businesses that have reviewed your credit report. “If you see unfamiliar names, contact them to find out why they were reviewing your credit,” Gallegos says.

What’s Included in My Credit Score?
In most cases, the credit score you order (again, for a fee) will be your FICO score, named for the company that developed it in 1989. Each of the credit bureaus may include different information in their calculations, so your FICO score can vary depending on which credit bureau provides the score. While the exact formula used to determine a FICO score is protected, FICO discloses some of the basic categories that affect a person’s score. For instance:

Payment history. Late payments on bills, such as a mortgage, credit card or car loan, will cause a FICO score to drop, while bills paid on time will improve a score. This category accounts for 35 percent of a score.

Amounts owed. If you owe a high percentage of your available credit on a credit card, for instance, you may appear to be overextended and at risk of late payment or nonpayment. If you have a history of small balances and not missing payments, that will improve your score. This category accounts for 30 percent of a FICO score.

Length of credit history. Accounting for 15 percent of your score, this category looks at how long your credit accounts have been established and how long it has been since you used specific accounts.

Types of credit used. This part of your score, worth 10 percent, looks at your mix of installment, revolving, consumer finance and mortgage loans. You can benefit by having a history of handling different types of credit.

New credit. The final 10 percent of your score considers how many new credit accounts you have opened in a short period of time. Hard credit inquiries, which occur when you apply for a credit card or loan, can hurt your score, especially if several occur within a short time frame.

The percentages attached to each category can help consumers determine which areas are most important to their score. According to Jeff Taylor, managing partner of Digital Risk, Inc., the most important items in your report are delinquencies and charge-offs, your percentage of revolving credit that is open (e.g. how much debt you owe versus how much credit you have available), and recent credit inquiries. “Delinquencies, especially with the last 12 months, are devastating,” Taylor says. “After that, the percent of revolving credit, then inquiries.”

What Should I Do If Something Is Wrong on My Credit Report?

If you think you see an error on your report, call the consumer credit bureau that provided the report and state your case. “If there is a material error, the bureau is required to post a fix within 30 days, or the line of credit has to be suppressed until the error is made right,” Taylor says.

And, of course, if your score is not where you want it to be, make sure to get and stay current on your bills and make a plan to pay off that revolving debt. (Here’s a good place to start.)

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